Railcar orders, jobs in jeopardy

Manufacturing - Fearing more layoffs, Greenbrier Cos. lashes out at top customer GE for wanting to rewrite its contract

Bill Furman, CEO of Lake Oswego railcar manufacturer Greenbrier Cos., took the unusual step of publicly blasting his largest customer Thursday, the day after Greenbrier announced that GE Railcar Services Corp. wants to "reduce, delay or otherwise cancel railcar deliveries" called for under its contract.

The GE contract accounts for 75 percent of Greenbrier's backlog of orders for railcars.

Greenbrier eliminated 150 jobs last month, and Furman said another thousand jobs hang in the balance.

"This is a very serious matter for Greenbrier," he said. "This is the biggest contract we've ever had. This uncertainty has put 1,000 people in a very dangerous position."

A GE official said the company wants to reach an accord with Greenbrier that both sides can live with. "Given the current economic environment, we are discussing whether there are potential modifications that may be mutually acceptable," company spokesman Stephen White said. "Let me stress, if there are potential modifications, we would want them to be mutually acceptable, good for us and them."

Greenbrier's contract with Chicago-based GE was a matter of celebration when first announced in October 2007. The pact called for Greenbrier to manufacture and deliver 11,900 tank and hopper railcars over eight years, with GE paying $1.2 billion.

The local company didn't make tanker cars in North America at the time. But at GE's urging, Greenbrier agreed to the contract. It invested $30 million in a new manufacturing line at one of its Mexican factories, Furman said.

Greenbrier employs 4,200 workers worldwide, nearly 1,100 in Oregon. Of those, nearly 900 work at its Gunderson facility in Portland, which manufactures barges and railcars.

In December, Greenbrier delivered the first of the railcars to GE out of 500 that were to be completed in the company's current fiscal year. About the same time, GE officials began warning Greenbrier executives that it probably shouldn't order more materials for the tanker cars and that it might think about slowing manufacturing.

GE hasn't canceled the contract outright. Furman said he's been unable to get a straight answer from GE about its intentions.

GE has plenty of other issues taking up its time. Though it earned a hefty $17 billion profit in 2008, the company has been dogged by rumors that it is in deep trouble. The company's stock has plummeted -- reaching an 18-year low Wednesday -- on fears that GE's financial subsidiary is sitting on tens of billions of dollars of toxic assets.

GE executives have scrambled to do damage control. In a written statement and a TV interview, Keith Sherin, GE chief financial officer, said recent speculation about risk at GE Capital is "overdone." GE has enough money to fund itself through 2010, with $45 billion in cash and an additional $60 billion available under the U.S. government's Temporary Loan Guarantee Program, Sherin said.

GE's holdings of commercial mortgage-backed securities are $2.9 billion, Sherin said, far less than the $45 billion cited in some market rumors.

Nevertheless, GE is experiencing financial issues, as its dealings with Greenbrier illustrate.

The tough times have already forced Greenbrier to make cuts. It reduced wages across the board last month -- 2 percent for the rank and file and up to 12.5 percent for higher-paid senior management. Furman says he took a 50 percent salary cut.

It will close one of its two factories in Mexico. It cut 150 jobs through layoffs and early retirements. Other production cuts could affect an additional 850 jobs, aside from the impact of the potential GE cuts.

Furman admits that criticizing any customer, let alone your largest customer, is unusual. "The irony here is that GE induced us to get into this contract," he said. "They're kind of turning their back when times are tough."